A futuristic approach to easing the labor crunch: interview with Shekar Natarajan
In the second of our three-part series of interviews on workforce issues, Shekar Natarajan of American Eagle Outfitters talks all things labor: the retailer’s recruiting and retention tactics, how technology has eased the squeeze, and why his company doesn’t really have a talent challenge.
Diane Rand is Associate Editor and has several years of magazine editing and production experience. She previously worked as a production editor for Logistics Management and Supply Chain Management Review. She joined the editorial staff in 2015. She is responsible for managing digital, editorial, and production projects for DC Velocity and its sister magazine, Supply Chain Quarterly.
Editor's Note: Since this interview was conducted, Shekar Natarajan has made a job change, taking on a new role as president of Quiet Platforms.
While no one has a crystal ball to see into the future, Shekar Natarajan says there are a couple of things he can predict with confidence: 1) labor will continue to be one of the biggest problems facing companies everywhere, and 2) technology will be part of the solution. In that regard, Natarajan can speak with some authority, particularly as it pertains to the practice of supply chain management. During his 24-plus year career, he has served as a supply chain executive at some of the world’s best-known companies, including Coca-Cola, PepsiCo, Walmart, and The Walt Disney Co. Today, he is chief supply chain officer of American Eagle Outfitters, where he has seen firsthand how technologies like robotics and AI can help ease companies’ staffing woes.
Natarajan recently spoke with Diane Rand, managing editor of DCV’s sister publication, Supply Chain Quarterly, as part of our series on finding and retaining a first-class workforce. The interviews in this series, which will conclude in our April issue, were conducted for “Supply Chain in the Fast Lane,” a podcast coproduced by Supply Chain Quarterly and the Council of Supply Chain Management Professionals (CSCMP).
Q: Could you tell us a little bit about American Eagle Outfitters and your role at the company?
A: American Eagle is a leading fashion-brand retailer, primarily serving the 15- to 25-year-old [demographic]. My role there is twofold. First, I lead the entire supply chain for American Eagle Outfitters, from the time the product is made in the factory to the time it reaches the end-consumer. We pick up the goods, transport them via ocean and air, bring them into the country, run them through the distribution center, and make the merchandise available to stores and, ultimately, to consumers.
My second role is leading the two companies that we recently acquired: Quiet Logistics and AirTerra. Quiet is primarily an “edge-fulfillment” company that provides order fulfillment and returns management services for e-commerce retailers, while AirTerra is an e-commerce delivery startup that I like to think of as the Uber of inventory movement.
Q: At a time when businesses of all stripes are experiencing an acute shortage of labor, what is your company doing to recruit and retain the supply chain talent it needs?
A: We took action early on to really think about and prepare for the talent problems that are going to hit us down the road. We introduced a lot of programs to bring talent into our distribution facilities and to maintain and grow that workforce. For example, we provide our associates with bone conduction headphones so they can listen to music while they’re working—and no, it doesn’t impede them in their work. We also let our associates take cellphones out onto the floor. We have raised wages and simplified the work as well.
Just as you have customer perks, we offer “associate perks” for doing an excellent job. For instance, the associates can earn leverage points [that can be redeemed for] concert tickets or Starbucks [gift cards].
As for the people who work at our headquarters, we have put a very strong “location” program in place. We have increased our capabilities around data science. We have decentralized our operations with respect to where people work. We have given our associates the ultimate flexibility so they can do their work—and we can attract talent—from all over the world. I’m proud to say that we don’t necessarily have a talent challenge in our company.
Q: What do you consider to be some of the best human resources practices from a strategic perspective?
A: For any transformation to happen and for any company to stay relevant in the future, it needs the ability to stay on the intersection of technology, operations, and optimization. That is the most important thing—the one that has made the companies that I have worked for great. I think that staying in that intersection and taking people along on the journey of transformation is super important.
It’s one thing to have a brilliant idea, but it actually takes a lot of inspiration and a major change-management initiative to drive it forward. People are a big component of that, and it takes a very differentiated approach to bring people along, because not everyone is on the same change curve. It is an important attribute for every leader and is super-critical for people to know.
The second thing is that every change requires a lot of persistence and patience on the part of the people charged with carrying out the plan. You have to really be dogged and persistent throughout it all. Seeing the vision come to life is a beautiful feeling, but it doesn’t happen overnight.
Q: We’ve talked a bit about employee retention, but what about recruitment? What steps are you taking to find the workers you need in the first place?
A: The approach that I have primarily taken is to decentralize operations. Building more operations in an industrial park in, say, a city of 50,000 where everybody’s competing for the same pool of workers is a recipe for inflation, because as you raise the wages, everyone around you has to raise the wages, and it’s a no-win situation. But decentralizing operations gets you closer to where people live, provides access to a diversified labor pool, and also mitigates the risks of concentrating operations—and labor—in a single industrial park.
We also engage with the local community, inviting people to come and actually visit our facility, look at the capabilities we have, learn about our workplace culture, and so on and so forth.
Q: You’ve written a number of articles for **ital{Supply Chain Quarterly} on the transformative role of technology. Can technology help companies respond to the labor challenges they currently face, and if so, how?
A: Yes, there are many ways in which technology can help companies deal with the worker shortage. One thing we are doing is to use robots to augment labor.
Let me give you an example. During the height of Covid, we brought in a lot of Kindred robots. The Kindred robots were performing matching for all of our e-commerce order picking. We used the robots not only to augment our human workforce, but [also to help us comply with Covid safety measures and restrictions]. What we did was position a robot between two stations where associates were performing fulfillment tasks, which provided the six feet of distance we needed between them. So, it was an augmentation but also served as a safety mechanism. It’s very unconventional thinking, right?
We have also brought in artificial intelligence and autonomous robots, which helps us flex to meet fluctuations in demand and reduces the need for more associates in the building. So, we have embraced technology in very smart and interesting ways to be able to mitigate some of the challenges we are going to see in the future.
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
Serious inland flooding and widespread power outages are likely to sweep across Florida and other Southeast states in coming days with the arrival of Hurricane Helene, which is now predicted to make landfall Thursday evening along Florida’s northwest coast as a major hurricane, according to the National Oceanic and Atmospheric Administration (NOAA).
While the most catastrophic landfall impact is expected in the sparsely-population Big Bend area of Florida, it’s not only sea-front cities that are at risk. Since Helene is an “unusually large storm,” its flooding, rainfall, and high winds won’t be limited only to the Gulf Coast, but are expected to travel hundreds of miles inland, the weather service said. Heavy rainfall is expected to begin in the region even before the storm comes ashore, and the wet conditions will continue to move northward into the southern Appalachians region through Friday, dumping storm total rainfall amounts of up to 18 inches. Specifically, the major flood risk includes the urban areas around Tallahassee, metro Atlanta, and western North Carolina.
In addition to its human toll, the storm could exert serious business impacts, according to the supply chain mapping and monitoring firm Resilinc. Those will be largely triggered by significant flooding, which could halt oil operations, force mandatory evacuations, restrict ports, and disrupt air traffic.
While the storm’s track is currently forecast to miss the critical ports of Miami and New Orleans, it could still hurt operations throughout the Southeast agricultural belt, which produces products like soybeans, cotton, peanuts, corn, and tobacco, according to Everstream Analytics.
That widespread footprint could also hinder supply chain and logistics flows along stretches of interstate highways I-10 and I-75 and on regional rail lines operated by Norfolk Southern and CSX. And Hurricane Helene could also likely impact business operations by unleashing power outages, deep flooding, and wind damage in northern Florida portions of Georgia, Everstream Analytics said.
Before the storm had even touched Florida soil, recovery efforts were already being launched by humanitarian aid group the American Logistics Aid Network (ALAN). In a statement on Wednesday, the group said it is urging residents in the storm's path across the Southeast to heed evacuation notices and safety advisories, and reminding members of the logistics community that their post-storm help could be needed soon. The group will continue to update its Disaster Micro-Site with Hurricane Helene resources and with requests for donated logistics assistance, most of which will start arriving within 24 to 72 hours after the storm’s initial landfall, ALAN said.